Source: TradingView, CNBC, Bloomberg, Messari
The Calm Before The Tariffs
It was a pretty slow week in the markets as most investors and traders gear up for the April 2nd tariff showdown. The entire digital assets market is trading on nothing more than macro sentiment, and Washington policy, regardless of sector. That statement will sound so foolish in a few years since “crypto” by itself means nothing – it is just a wrapper that now houses all types of assets in every sector, and saying that “crypto is selling off” will one day sound as stupid as saying “ETFs are lower.” But I digress as crypto itself regresses.
Logically, it obviously makes zero sense that crypto is keying on tariffs since, by definition, crypto is probably the only industry in all of the financial markets that is NOT affected in any way by tariffs (remind me, exactly which digital goods are being taxed?). If this is less about tariffs and more about stagflation and recession fears, well, that too should have little effect on the majority of digital asset businesses, which I’ve argued in the past are
actually quite recession-proof. But logic has been thrown out the window in crypto now that the entire sector has become one large macro trading vehicle.
The only notable difference in market structure last week came from credit spreads, which are finally starting to widen a little after completely ignoring the move in gold, equities, and crypto for most of the year.
Source: Fred
That said, the 60 basis points of widening in credit spreads is fairly meaningless in the context of absolute yields for corporate borrowers, as Treasury yields have fallen by an equal amount since the peak of high rates earlier in the year. Moreover, if you look at credit spreads over the last 10 years, the recent widening barely even registers. Another way is that if credit isn’t leading risk markets, then it still looks to me like a risk-off sentiment freak-out akin to 2013 and 2019 taper tantrums or 2018 tariff fears, rather than an actual recession fear trade.
Source: Fred
Is Anyone Still Excited About Blockchain?It feels pretty dark in the crypto industry right now. It is not necessarily more or less than in other periods of declining price action over the past 10 years, but it is definitely a bit different. Perhaps the misery lies in the fact that crypto is still in a binary state (what we call the
crypto investing paradox), and everyone (including ourselves) assumed that this industry would have made more progress towards advancing out of the doldrums given the excitement and positive change from Washington. Or perhaps it’s because crypto participants have always been on the defensive, and that’s just exhausting.
But in lieu of any interesting crypto-specific news last week, we took some time polling other funds, OTC desks, exchanges, and other professionals working in crypto about what they are most excited about.
We asked hundreds of close friends of Arca the following questions:
“Name 5 things that could happen in our space that would be interesting and valuable to end users”
“What could happen that would be a big net win for the industry? “
“How do we reject modernity (financial nihilism) and embrace tradition (cypherpunk, decentralized, collaborative products)?”
Below are a few of our favorite responses.
- AI Agent Swarms - This includes:
- Data verification
- Inference verification
- Permissioned context sharing amongst agents but not amongst users (data clean rooms)
ability to transact on behalf of the user
Blockchains can solve a lot of these problems. Agentic/robotic / AI economies will emerge and they will have more participants and more transactions than the current meat space economies. So, if data marketplaces are already extremely valuable, then they are likely to become more valuable over time. Data ownership again falls into the lap of blockchain.
Financial applications will also benefit from AI – for instance, using swarms to transact, leading to permissionless execution for end users’ financial goals.
- Memberships: Memberships to just about anything can be owned as NFTs. Think Mercedes Club, classic car clubs, gyms, restaurants akin to Flyfishclub, etc. Holders have a right to lease their membership, rent a classic car for a weekend, eat at a more exclusive part of a restaurant, etc.
- Health care on chain - Beyond tokenizing health records (which would be great), there are supply chain applications for areas of medical devices, medical materials (vaccines), and medications. Again, these aren’t issues we regularly face, but there is a lot of fraud with all of these items AND issues tracking their origins that can have lasting impacts on healthcare outcomes.
- Unlocking emerging markets - Outside the U.S., markets are often inefficient, and small to medium-sized businesses are often unable to get loans and other financing. DeFi products that don’t discriminate based on location, gender, appearance, or any factors other than the safety of the collateral and the creditworthiness of the borrower can open up non-U.S. markets. Developing robust decentralized identity solutions that allow individuals to own and control their personal data and reputation across platforms would enable seamless access to services without relying on centralized authorities or credit scores, enhancing privacy and security.
- Stablecoin growth and adoption: Stablecoins are interesting to the TradFi players partly because collateral movement and management will essentially be solved by 24/7 crypto rails. But that is just your decentralized and collaborative doorway. If banks want to make money mobile between them on-chain at all hours of the day, then that means money is also going to be properly programmable on-chain and accessible to the whole crypto ecosystem. Once JPM is moving your paycheck on-chain, who's to stop some project from launching a decentralized mortgage? And why would you need payday lenders if you can get paid micropayments by the hour?
- Stocks and other financial assets on-chain - The term “RWA” gets thrown around too much right now, but it only really refers to private credit and tokenized Treasuries thus far. The real growth in blockchain happens when we get stocks and bonds and real estate on-chain for investors who do not want to offboard old incumbent TradFi brokers. This includes:
- Self-custodial stablecoin savings account (automated yield-bearing stablecoin) with Visa / MC and Apple Pay integration
- Overcollateralized BTC-backed mortgages
A lot of society now recognizes that banks are quite limited in what they can offer, and many want a smoother, full-encompassing financial service while retaining almost all of the self-sovereignity of their capital. Many in the industry want a DeFi bank where people can quickly go back and forth between traditional rails and crypto rails, move their assets in and out, pay bills, pay a mortgage, build credit, take out a loan, pay for college, etc. Banks are just big intermediaries that get paid a ton of money to hold your cash while sharing little of the yield with you, but the workflows and integrations (and FDIC insurance) have trapped most consumers. DeFi can unlock all of the capital that is trapped in traditional banks.
